UPDATE 2-Canadian Natural in talks over royalty land sale - sources

(Adds no comment from CNRL)
By John Tilak and Euan Rocha
TORONTO, Oct 30 (Reuters) - Canadian Natural Resources Ltd
CNQ.TO has discussed spinning off royalty assets with some
pension plans and strategic buyers, according to three sources
familiar with the situation.
The company, which had said in May it intended to sell the
assets this year, has engaged with the Canada Pension Plan
Investment Board, Ontario Teachers' Pension Plan and PrairieSky
Royalty Ltd PSK.TO , said the sources, who spoke on condition
of anonymity as the talks are not public.
The move comes about four months after Cenovus Energy Inc
CVE.TO agreed to sell its royalty lands to Ontario Teachers'
for C$3.3 billion and more than a year after Canada's largest
natural gas producer Encana Corporation ECA.TO spun off its
royalty assets though PrairieSky.
PrairieSky and Teachers were not immediately reachable for
comment. Canadian Natural and CPPIB declined to comment.
Shares in Canadian Natural closed up less than 1 percent at
C$23.17 on Friday.
Analysts estimate the value of the assets range from C$1
billion to C$2.5 billion.
Canadian Natural, the country's second-largest oil and gas
producer, is keen on ensuring that it gets cash, and not equity,
the sources said.
"The good thing is that they're not motivated sellers like
some others. Unlike other sellers they are in a strong position,
and can wait for the right window, or price," said one source,
adding that it is going to be "very difficult" for Canadian
Natural to get the valuation that Cenovus got on their lands.
Given the volatility in the price of oil, the company is
keeping all options open and has not made a decision to sell the
assets right away, the sources said, adding it could hold off
until prices improve.
Since the selloff in oil began a year ago, merger and
acquisition activity has waned in the energy patch.
An initial public offering, which was the avenue that both
Cenovus and Canadian Natural were considering after PrairieSky's
IPO, is certainly off the table, the sources said.
One factor favoring a sale would be to use the proceeds to
fund opportunistic acquisitions in this low-price environment,
said the sources.
Both Ontario Teachers' and CPPIB, two of the country's top
pension fund managers, have expressed interest in expanding
their energy investments to take advantage of lower valuations.